Why Have Banks Really Tightened Lending Standards?

Daily Real Estate News | Monday, January 30, 2012

Home ownership affordability is at a record high due to low home prices and all-time low mortgage rates. But housing experts have blamed banks' tightened lending standards for keeping more buyers on the sidelines because they are unable to qualify for financing.

Lending standards increased sharply after the financial crisis in 2008, and even after the recession ended in 2009. Lenders have yet to ease their stricter standards, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn.

Why? The researchers say it’s mostly because there’s less money available to lend.

“During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up,” an article at MSNBC.com notes, in describing the study’s findings. “That market has all but vanished; 90 percent of new mortgages written today are backed by the government.”

Also, researchers found that lenders are swamped with more paperwork, which is also causing delays in processing. Many lenders have issued stricter documentation requirements before they’ll approve a loan. Nowadays, nearly 90 percent of mortgage applications require “full documentation” before getting approved. From 2000 to 2006, less than 60 percent of applications required “full documentation,” researchers found

Consumer Sentiment Rises in January for Fifth Monthly Gain:

A measure of consumer sentiment rose in January for the fifth straight monthly gain, according to data released Friday, as job gains helped put worries about U.S. government finances in the background.
The final January reading of the University of Michigan/Thomson Reuters gauge of consumer sentiment reached 75.0, compared to a preliminary report of 74.0 and a December reading of 69.9. The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession.
Recent job growth has been improving, though still well below the pace needed to bring unemployment significantly below the 8.5% rate it was last month.
Obviously, this is important to housing. As consumers feel better about the economy, the more likely they are to purchase a home.

A reprieve for unemployed borrowers

Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.
Making sense of the story

• In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
  
  
• There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
  
  
• The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments. Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
  
  
• However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
  
  
• Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.

Fed Vows to Keep Rates Low Until 2014

Daily Real Estate News | Thursday, January 26, 2012   

The Federal Reserve announced that short-term interest rates will likely stay near zero for nearly three more years, a move that is expected to spillover to long-term mortgage rates for home buyers and home owners.

In August, the Fed had made a rare move to say it would keep rates near zero until at least mid-2013. The Fed said Wednesday that the economy still needs more help and it will now extend that period to 2014.

Fed Chairman Ben Bernanke said in a news conference that the Fed isn’t happy with the modest economic recovery and that the Fed may need to take additional steps to spur recovery. He did not comment further on what those steps might be, though.

While the economy has improved somewhat in recent weeks, Fed officials say it’s worried about “strains in global financial markets” and the still high unemployment rate.

Some critics say that the Fed’s vow to keep mortgage rates longer won’t do enough to help the economy and the housing market. They argue that too many Americans are already unable to take advantage of the record low mortgage rates because of the tightening of lending standards.

Bernanke shared that concern, saying that millions of home owners were unable to refinance because of damaged credit or being from underwater in their homes.

10 Cities Where List Prices Soared in the Last Year

Daily Real Estate News | Thursday, January 26, 2012   

List prices are heating up in Florida, as recovery takes hold in the Sunshine State. Florida boasts the highest number of cities in the top 10 for largest increases in median list prices in the last year. In Miami alone, median list prices have jumped 32 percent in the last year.

Nationwide, median list prices have inched up 5.03 percent from December 2010 to December 2011, according to Realtor.com data.

The following cities are where median list prices have increased the most in the last year, based on December 2011 data of 146 metro areas from Realtor.com:

1. Miami, Fla.
Year-over-year increase: 32.50%
Median list price: $265,000

2. Naples, Fla.
Year-over-year increase: 21.67%
Median list price: $365,000
3
. Fort Myers-Cape Coral, Fla.
Year-over-year increase: 21.47%
Median list price: $229,375

4. Punta Gorda, Fla.
Year-over-year increase: 19.42%
Median list price: $179,000

5. Boise City, Idaho
Year-over-year increase: 19.25%
Median list price: $154,900

6. West Palm Beach-Boca Raton, Fla.
Year-over-year increase: 18.38%
Median list price: $219,000

7. Sarasota-Bradenton, Fla.
Year-over-year increase: 17.62%
Median list price: $241,000

8. Daytona Beach, Fla.
Year-over-year increase: 16.06%
Median list price: $179,900

9. Phoenix-Mesa, Ariz.
Year-over-year increase: 13.79%
Median list price: $165,000

10. Grand Rapids-Muskegon-Holland, Mich.
Year-over-year increase: 13.32%
Median list price: $137,000

FHA May Ease Seller Concession Cap

Daily Real Estate News | Wednesday, January 25, 2012

Many in the real estate industry were concerned that a change announced last year to the maximum seller contributions allowed for Federal Housing Administration-insured loans could cause more deals to fall apart. The FHA announced last year that it would cut seller contributions from 6 percent to 3 percent for purchases using FHA-insured loans. Seller concessions, such as seller assistance to buyers in closing costs, can play a big part in FHA-financed home sales and in closing deals, real estate agents say.

Inman News reports that the FHA may be rethinking its seller contribution cap and will likely announce changes to its policy in April.

“Rather than an across-the-board 3 percent ceiling on all FHA mortgages, the new policy would permit higher seller contributions, probably between 4 and 5 percent, on smaller loan balances,” Inman News reports. “Meanwhile, the 3 percent cap would be mandatory on all loan amounts above some yet-to-be-specified limit.”

Inman News also speculates that a dollar ceiling on seller concessions might be announced, like a maximum cap of $6,000 instead of a percentage.

"The FHA is what's keeping us alive," Steve A. Brown, executive vice president of Memphis-based Crye-Leike, told Inman News. "If they do a 3 percent across-the-board limit, that would knock out a lot of our sales. But if they go with some graduated deal tied into lower-priced homes, then we should be all right.

6 Most Stressful American Cities

Daily Real Estate News | Wednesday, January 25, 2012

Some cities are known for having more stress than others. Sperling’s Best Places recently ranked the most stressful cities in the country, taking into account such factors as unemployment, suicide rate, divorce rate, commute times, crime, mental health, and the number of cloudy days, among other factors.

Florida cities appeared the most in the top 10.

“I was shocked by the concentration of Florida cities clustered in the top ten,” Bert Sperling, lead researcher, said in a statement. “But when we look into the statistics, we can see some of the reasons,” such as high levels of divorce, suicide, unemployment, and stress from a sluggish housing market.

The following are the cities that topped Sperling’s “Most Stressful City” list for 2012, as well as a few factors contributing to the city residents’ unease.

1. Tampa-St. Petersburg-Clearwater, Fla.: A high suicide rate was among the most notable stress factors for Tampa.
Divorce rate: 12.3%
Commute time: 28.3 (minutes)
Unemployment: 11.2%
Violent crime (per 100,000 population): 500

2. Las Vegas-Paradise, Nev.: It emerges on top for highest divorce rate in the nation.
Divorce rate: 13.2%
Commute time: 27 (minutes)
Unemployment: 14%
Violent crime (per 100,000 population): 763.4

3. Miami-Miami Beach-Kendall, Fla.: The city’s stress is mostly blamed on a high number of violent crime rate and high alcohol consumption.
Divorce rate: 11.5%
Commute time: 33.2 (minutes)
Unemployment: 12.5%
Violent crime (per 100,000 population): 733.3 

4. Jacksonville, Fla.: One of the city’s top stressors is its high divorce rate.
Divorce rate: 12.3%
Commute time: 28 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 557

5. Detroit-Livonia-Dearborn, Mich.: The city is in the 100-percentile in the nation for the most violent crime and property crime.
Divorce rate: 11.4%
Unemployment: 15.7%
Commute time: 27 (minutes)
Violent crime (per 100,000 population): 1111.2

6. Orlando-Kissimmee, Fla.: The city has a high number of property crimes, which contributes to its stress.
Divorce rate: 10.7%
Commute time: 29.6 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 613.7

More Buyers Ready to Get Off the Sidelines?

Daily Real Estate News | Tuesday, January 24, 2012   

When you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense, Paul Diggle, a housing economist at Capital Economics, told MSNBC.com.

Diggle’s analysis of the housing market showed a 33 percent drop in home prices, record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents since the housing market turned sour are making more consumers take a closer look at buying.

“The median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check,” an article at MSNBC.com notes about Diggle’s analysis. “If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning.”

Case in point: Diggle says that a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years. Diggle’s calculations factor in rents continuing to rise 3 percent a year, and housing prices staying flat for the next two years before rising in 2014.

But while more Americans may be motivated to buy, many still can’t, Diggle notes. Home owners who lost their home to foreclosure may be forced to wait on the sidelines before owning again, other Americans may not have a 20 percent down payment that more lenders are wanting, lack a high credit score to qualify for the best financing, or have steady employment.

Are Cash Buyers Driving Down Home Prices?

Daily Real Estate News | Tuesday, January 24, 2012   

Cash buyers are sending home values down much lower than they otherwise would be, suggests a new survey by Campbell Inside Mortgage Finance, which polled more than 2,500 real estate agents nationwide.

In its December Housing Pulse Tracking Survey, the company found that investors accounted for one out of three real estate transactions last month, and about 74 percent of those purchases by investors were made using all cash.

“Investors have an over-sized command on the market since their ability to pay cash in the majority of transactions puts undue downward pressure on home prices,” an article at Housing Predictor notes about the study.

Cash buyers can be attractive to home sellers, banks, and mortgage companies, since they do not usually come with contingencies, require extra time to secure financing, and tend to move more quickly to closing. As such, cash buyers tend to make purchases at lower prices than those who may need financing or come with contingencies.

2 Big Banks Slash Foreclosure Sale Timelines

Daily Real Estate News | Tuesday, January 24, 2012   

Foreclosures are getting faster at JPMorgan Chase and Wells Fargo. The two big banks trimmed their foreclosure timelines by as much as 100 days in the third quarter of 2011, helping to work through major backlogs of foreclosed loans, according to a Moody’s Investors Service report. But while foreclosure sales are getting speedier, the report warns that there’s still a long way to go in working through large inventories of REOs that are continuing to slam the nation’s banks.

Chase averaged 264 days from referral to foreclosure sale in the third quarter for subprime mortgages — a big drop from the 412 days it averaged three months prior to that. Chase boasted the shortest time of any of the big five mortgage servicers. Wells Fargo also greatly reduced its foreclosure timeline to 314 days from 454 days compared to the previous quarter.

"Servicers completed their robo-signing reviews and are no longer holding up foreclosure sales, which is clearing out their pipelines somewhat," according to the Moody's report. "Chase and Wells decreased their foreclosure sale timelines significantly."
Some mortgage lenders, however, are still plagued by delays. For example, GMAC, part of Ally Financial, took an average 550 days to move a loan through foreclosure, according to the report.

6 Housing Markets Gear Up for a Rebound

Daily Real Estate News | Monday, January 23, 2012   

Stronger job markets are pushing several cities’ housing markets into recovery-mode. Forbes and the Local Market Monitor, a real estate research firm, recently profiled its top picks for cities that are most poised for a real estate rebound. The list is based on housing and economic data from the 100 largest cities in the country.

“For real estate to do well you want to see two things: that incomes are growing rapidly … and that the growth in jobs attracts other people to that market,” Ingo Winzer, founder and president of Local Market Monitor, told Forbes.
Here are the cities topping the list:

1. San Jose, Calif.
Population growth: 5 percent
Job growth: 3.3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 97 percent increase

2. Houston, Texas
Population growth: 7 percent
Job growth: 3 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 38 percent increase

3. Boston, Mass.
Population growth: 3 percent
Job growth: 2.1 percent
Home prices for the past 12 months: 1 percent decrease
New-home construction: 1 percent increase

4. Raleigh, N.C.
Population growth: 12 percent
Job growth: 1.4 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 14 percent increase

5. Austin, Texas
Population growth: 11 percent
Job growth: 1.5 percent
Home prices for the past 12 months: 2 percent decrease
New-home construction: 20 percent increase

6. Oklahoma City, Okla.
Population growth: 4 percent
Job growth: 2.6%
Home prices for the past 12 months: 3 percent decrease
New-home construction: 1 percent decrease

Shopping for the best rates

Interest rates are the lowest in decades, enticing many borrowers to shop for a loan. Mortgage lenders adjust their rates based on perceptions of risk, so unless the borrower can show they’re a low-risk individual, the borrower is unlikely to qualify for a rate that matches those seen in recent advertisements and headlines.
Making sense of the story

• The rates quoted are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. Consumers who want to try for the lowest rates available need to consider basic factors, such as credit score, points, property type, down payment, and length of the loan.
  
  
• Credit score: The ideal borrower has a FICO score of 740 or higher, which puts the individual in the best place for pricing.
  
  
• Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. Borrowers may buy points in order to get the best rates at many banks. Points might make sense depending on the borrower’s financial situation and how long they expect to stay in the home.
  
  
• Property type: Borrowers planning to buy a duplex or a four-unit build likely will have a higher interest rate. Condominiums also may have a rate premium rate, especially if they are newer or the down payment is less than 25 percent. Lenders also may charge more if the borrower is not planning to live in the home.
  
  
• Down payment: Borrowers who put down at least 25 percent are more likely to obtain the best interest rates. Lenders offer different breaks on rates if equity in the property is higher, so borrowers should ask what is available.
  
  
• Length of loan: Borrowers who are likely to move in a few years may want to look into an adjustable-rate loan with a low interest rate fixed for a few years, and adjusted afterword.

Foreclosure Filings Hit 4 Year Low:

The number of U.S. homes that received a foreclosure filing fell to a four-year low in 2011 as a slowdown in processing hit the market, RealtyTrac said in a report on Thursday.
Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, slid by 34 percent in 2011, the lowest level since 2007, just as the housing market was starting to crumble. RealtyTrac said there were filings on 1,887,777 homes last year.

Bank seizures of homes fell to 804,423 from 1,050,500 in 2010, also marking the lowest level in four years.

"A big part that is inflating the size of the decrease is a continuing extended foreclosure process," said Daren Blomquist, director of marketing communications at RealtyTrac.

Nevada ranked as the state with highest foreclosure rate for the fifth year in a row, with one in 16 Nevada homes receiving at least one foreclosure filing in 2011. Even so, Nevada saw a 31 percent decrease in foreclosure activity for the year.

The length of time for foreclosure processing continued to increase in the final quarter of the year. Homes took on average 348 days to move through the process, up from 336 days in the third quarter and 305 days in the fourth quarter of 2010.

Foreclosures took the longest in New York state, where homes foreclosed in the fourth quarter took an average 1,019 days to complete the process. RealtyTrac also released foreclosure activity for December, which fell to a 49-month low of 205,024 homes, down nearly 9 percent from November. But bank repossessions rose 10 percent to 61,774.

A good rental history can help borrowers

First-time home buyers planning to purchase a house later this year may have a better chance of qualifying for a mortgage if they have had a history of paying their rent on time.
Making sense of the story

• Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people. The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
  
  
• Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
  
  
• Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau. Those with average or higher scores did not experience major movement.
  
  
• Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
  
  
• People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
  
  
• However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report. Rent may not have been paid, for example, because the furnace was left unrepaired for months.

Consumer attitudes improve in December

Americans' attitudes on a variety of issues are marginally better than one month ago, according to results from Fannie Mae’s December National Housing Survey. Despite overall low levels of optimism among Americans, consumer sentiment trended in a positive direction in the final months of 2011.

Americans who say the economy is on the right track rose by 6 percentage points since November, while the percentage who say the economy is on the wrong track dropped by 6 percentage points. When asked about housing, more Americans expect home prices to to increase compared to November and, on average, Americans expect home prices to increase by 0.8 percent over the next year, up from an expected 0.2 percent increase last month.

Highlights of the survey include:

• Thirty-six percent of Americans say that mortgage rates will go up over the next 12 months, up 3 percentage points from November and was even with October.
• Seventy-one percent of respondents say it is a good time to buy a home (up 3 percentage points since last month), and 11 percent say it is a good time to sell.
• On average, Americans expect home rental prices to increase by 3.5 percent over the next 12 months, up from 3.2 percent in November.
• Five percent expect a decline in home rental prices over the next 12 months (tying May 2011 as the lowest point in the past 12 months), while 43 percent of respondents believe that home rental prices will increase.
• Thirty-one percent of Americans say they would rent their next home, while 64 percent say they would buy, up 1 percentage point from last month.

U.S. home values flat in November

Home values in the United States were essentially unchanged in November, decreasing a marginal 0.1 percent from October, according to this month's Zillow Real Estate Market Reports. Annually, the Zillow Home Value Index fell 4.6 percent from November 2010 to $147,800 and has returned to late 2003 levels.
Regionally, home values appreciated or remained flat from October to November in 60 percent of the 165 housing markets covered by Zillow, compared with 24 percent the year prior. Major metropolitan statistical areas (MSAs) that experienced flat or increasing home values include Los Angeles, Washington, Miami-Ft. Lauderdale, Fla., San Francisco, and Detroit. On an annual basis, the median home value is down for nearly all (90 percent) of the 165 MSAs covered by Zillow, although the rate of annualized depreciation has slowed significantly in the majority of the markets.

"Even with the anticipated increase in foreclosures, look for 2012 to be a transitional year in which home values fall modestly followed by a prolonged period of flat home values,” said Zillow Chief Economist Dr. Stan Humphries. “We're still three to five years away from 'normal' housing market conditions."

4 Ways to ID Borrower-Assistance Scammers

Daily Real Estate News | Friday, January 13, 2012   

Scammers have targeted delinquent borrowers during the past few years, hoping to take advantage of their desperation and financial inexperience. Their approach typically involves posing as a representative of a nonprofit or government agency who can help with a loan modification or some other form of assistance.

Sheri Stuart, education manager at Springboard Nonprofit Consumer Counseling, says she frequently encounters consumers at courses offered by her organization who have been victimized by these scams. Stuart says she recently met a couple from Southern California at one of these events who’d paid $3,000 to a fraudulent company in an attempt to keep their home out of foreclosure.

“It’s disconcerting,” she says. “It has a ripple effect. It not only affects the home owners, it affects the communities as well.”

To keep more consumers from being taken in by these scams, Stuart offers the following four red flags to help determine whether borrowers’ knight in shining armor is actually a swindler on the make:

1. They ask for money up front. “That’s usually an indication that someone has an ulterior motive,” Stuart says.

2. “Phantom help” appears out of nowhere. If a consumer hasn’t proactively contacted anyone about missed mortgage payments, but suddenly gets calls and mail about getting help for missed mortgage payments, it’s probably a scammer.

3. They present phony credentials. Many companies that claim to offer assistance will have official-looking seals from credentialing institutions on paperwork, promotional materials, and Web sites. Research those organizations to make sure they actually exist.

4. They make promises they can’t deliver. If they make ambitious guarantees about being able to modify loans or halt foreclosures, that should set off alarm bells. “Nobody can promise you a loan mod,” Stuart says.

If your clients suspect they have been or are being targeted, point them to Loanscamalert.org to get more information and report the scammers.

By Brian Summerfield, REALTOR® Magazine

Housing Scorecard shows overall outlook mixed

HUD and the U.S. Dept. of the Treasury released the December edition of the Obama Administration's Housing Scorecard this week. Data in the Scorecard show some subtle improvements in the market over the past year, but underscore fragility as the overall outlook remains mixed. For example, new and existing home sales rose compared with the prior month and remain higher than a year ago, and homes are more affordable than they have been since 1971. Median-income families today have nearly double the funds needed to cover the cost of the average home. However, home prices showed a slight dip from the prior month and remain below year ago levels.
The December Housing Scorecard features key data on the health of the housing market and the impact of the Administration’s foreclosure prevention programs, including:

• More than 5.5 million modification arrangements were started between April 2009 and the end of November 2011 – including more than 1.7 million HAMP trial modification starts and more than 1.1 million FHA loss mitigation and early delinquency interventions.
• Nearly 910,000 homeowners have received a HAMP permanent modification to date, saving an estimated $9.9 billion in monthly mortgage payments. The Administration’s programs continue to encourage improved standards and processes in the industry, with HOPE Now lenders offering families and individuals more than 2.6 million proprietary mortgage modifications through November.

Freddie Mac extends forbearance to unemployed borrowers

Freddie Mac is giving mortgage servicers expanded authority to provide six months of forbearance to unemployed borrowers without Freddie Mac's prior approval and up to an additional six months with prior approval. This means unemployed borrowers may be eligible for up to 12 months of forbearance. Freddie Mac's forbearance options are being expanded at the direction of the Federal Housing Finance Agency and will take effect on Feb. 1.

Delinquent borrowers in an existing short term forbearance plan can be evaluated for an extended forbearance under the new policy.

Previously, Freddie Mac allowed servicers to grant up to three months of forbearance with no payment and without prior approval, or six months at a reduced payment with prior approval. Longer forbearance required prior approval and was generally restricted to events such as natural disasters, permanent disability or long-term medical emergencies.

Jobs data points the way to stronger housing:

Real Estate used to be about location, location, location. Now it is most certainly about jobs, jobs, jobs.

We received some welcome news on the jobs front last week:

The private sector added a seasonally adjusted 325,000 jobs during the month, up from 204,000 in November, payroll-processing firm ADP said:

It marked the biggest monthly gain since December 2010, and was stronger than expected. Economists surveyed by Briefing.com were forecasting a gain of 180,000 jobs for the month. And the great news is that half of the gains were made by small business (companies with fewer than 50 employees).

Headline National Unemployment Rate Drops to 8.5%:

The U.S. Unemployment Rate unexpectedly fell to 8.5 percent last month as job creation was more robust than expected, providing continued signs that the nation's labor market is improving gradually.

Growth in manufacturing jobs helped offset a loss in government positions, while wages edged higher and the length of the work week also lengthened a bit. Job gains came from a variety of quarters: Transportation and warehousing surged by 50,000, the couriers and message industry rose 42,000, and retail added 28,000. Manufacturing grew by 23,000 and the hospitality industry continued its brisk pace, adding 24,000 jobs in December and 230,000 over the past year at food and drinking establishments.

Five issues for housing in 2012

Just as in 2011, in 2012 many will be trying to figure out where housing is headed. While the housing market didn’t worsen in 2011, it also didn’t stabilize either. This year, the story will be about local markets. While many housing markets rose and fell together, they’re recovering at difference paces so talking about housing on a national level is not beneficial.
Making sense of the story

• Confidence and jobs: Housing is more affordable than it has been in decades, but many would-be buyers are worried about buying today if prices are going to be lower tomorrow. Still, others don’t want to buy a house until they have more evidence that they’re not going to get laid off or see their hours cut back.
  
• Foreclosures: Banks and other mortgage investors own around 440,000 foreclosed properties, but there’s another 3.4 million loans in foreclosure or serious delinquency, according to estimates by Barclays Capital. Because banks are faster to cut prices to unload inventory than are traditional sellers, home values can fall further as the share of distressed sales rises.
  
• Rents: If low mortgage rates aren’t enough to give urgency to would-be buyers, rent hikes could accelerate buyers’ decisions to take the plunge.
  
• Mortgage credit and rates: It’s still hard for many buyers to get approved for a mortgage because banks are demanding lots of documentation of borrowers’ incomes.
  
• Regulation: Many analysts don’t expect Congress to make major changes to Fannie Mae and Freddie Mac during the election year, but several major regulatory changes could significantly reshape the future of the lending landscape in 2012.
  
  
• Meanwhile, the regulator that oversees Fannie and Freddie is revamping the way that mortgage companies are paid for collecting loan payments. This could lead to a broader shakeup in the mortgage industry that ultimately influences how much borrowers are charged for mortgages and how banks handle loans that fall into delinquency.

Pending Home Sales Hit 19 Month High:

The number of Americans who signed contracts to buy homes in November rose to the highest level in a year and a half. The best reading on pending homes sales since a federal home-buying tax credit expired appeared to encourage traders on Wall Street.

The Realtors group said Thursday that its index of sales agreements jumped 7.3 percent last month to a reading of 100.1. A reading of 100 is considered healthy. The last time the index was that high was in April 2010, one month before the tax credit expired.

Contract signings usually indicate where the housing market is headed. There's a one- to two-month lag between a signed contract and a completed deal.

Homes are the most affordable they've been in decades. Long-term mortgage rates are at historic lows and prices in most metro areas have tumbled since late 2006.

Construction Spending Rises, Hopeful Sign for Economy

Daily Real Estate News | Wednesday, January 04, 2012   

Construction spending on single-family homes, apartments, and remodeling projects increased in November, helping the economy finish 2011 strong and start 2012 with yet another sign that points to an economy finally in recovery mode, the Associated Press reports. The news joins other recent reports that show consumer confidence is up, manufacturing activity is pushing higher, and the unemployment rate is at a three-and-a-half-year low.

Construction projects in November increased 1.2 percent in November to a seasonally adjusted annual rate of $807.1 billion, the largest increase since August. Yet, the number is still about half the $1.5 trillion pace that economists consider healthy for the sector.

"While spending on single-family construction still remains extremely depressed, it has now increased for six straight months and looks consistent with other indicators signaling some improvement in the housing market," Daniel Silver, an economist with JPMorgan Chase, told the Associated Press.

In November, spending on home improvement projects soared 9.5 percent, the Commerce Department reports. Single-family home construction spending increased 1.5 percent, and apartment building spending increased 1.3 percent in November.

How Long Will Low Mortgage Rates Last?

Daily Real Estate News | Tuesday, January 03, 2012   

For nine consecutive weeks, the 30-year fixed-rate mortgage has been hovering at or below record lows of 4 percent, pushing housing affordability for home buyers even higher.
But will these low rates stick around much longer?

The Federal Reserve has vowed to keep rates low through 2013 so rates likely will hang around for a few more months, at least, but whether mortgage rates will stay at the current record-lows, many experts say it’s unlikely.

The 30-year fixed-rate mortgage is expected to inch up to an average 4.5 percent for 2012 and increase to 5.4 percent in 2013, according to Freddie Mac economists’ forecasts.

While that forecast means rates are expected to move higher in the coming months, the rates will still be low by historical standards, economists told the Los Angeles Times. For comparison, 30-year rates averaged more than 16 percent in 1981 and 1982. What’s more, until 2000, rates typically were above 8 percent, Freddie Mac notes.

Despite the drop in rates, however, many home buyers have been unable to take advantage of the low rates. Lenders’ tightening of their underwriting standards for loans in the recent years following the housing crisis has shut some buyers who have poor credit, low down payments, or unsteady employment from securing a loan at today’s low rates. Freddie Mac had predicted home-purchase applications to comprise two-thirds of all mortgage applications by the end of 2011. But the Mortgage Bankers Associations says that instead about 80 percent of the mortgage applications came from home owners who wanted to refinance.

Getting back in the black

More than 2.6 million households are at least 60 days delinquent on their mortgage payments, according to the nonprofit coalition Hope Now. While those who are delinquent 60-120 days can make back payments to help them become current, those who are more than two months behind may need to employ other means to catch up.

Making sense of the story

• Beyond the obvious threat of foreclosure, falling behind on a mortgage can be costly: Lenders charge late fees as well as legal and administrative costs, and the borrower’s credit score will suffer. Experts say the sooner a delinquent borrower deals with the situation, the better the chances are of making a full economic recovery.
  
• Borrowers who are determined to stay in their home but cannot immediately make back payments need to start by contacting their lender or a credit counselor to discuss available options. Among them are devising a repayment plan, modifying the loan, doing a short sale, and adding what is owed back into the mortgage balance.
  
• The first step borrowers should take is to assess their financial situation by looking at the amount of money brought in each month versus what is spent. Many credit and housing counselors have worksheets on their websites to help with this.
  
• Next, borrowers should collect pay stubs, documentation on other income, two years’ worth of tax returns, two months of saving and checking account statements, and mortgage records. If the borrower has experienced a hardship, such as a layoff, a divorce, or an illness, they should gather evidence of that, such as unemployment insurance receipts, medical bills, a copy of a doctor’s letter to their employer, or a divorce decree.
  
• Finally, borrowers should talk to their lender, servicer, or an adviser. The federal Dept. of Housing and Urban Development certifies counseling agencies that provide free advice and assistance, and has a list of them on its website. Counselors can offer alternatives and prepare a budget to see if the homeowner can afford to stay in the house.
  
• Before agreeing to a repayment schedule, it is important homeowners understand how their lender treats partial payments. Some credit partial payments toward the balance immediately, while others hold the money in a “suspend account” until the full amount is received. Some will return the check to the borrower, and some will stop accepting payments after the mortgage is seriously delinquent.